RI ESG Briefing, Feb. 26: IIGCC, Citigroup, Carbon Tracker, fracking, Climate Disclosure Standards Board

The round-up of the latest environmental, social and governance news

Environmental

The Institutional Investors Group on Climate Change, which represents more than 100 European investors worth a combined €10trn, says this week’s ‘Market Stability Reserve’ (MSR) vote at the European Parliament’s environment committee on starting the MSR by the end of 2018 and placing backloaded and unallocated carbon allowances into the reserve sends a “mixed signal to investors”. IIGCC Chief Executive Stephanie Pfeifer said the agreement on placing the backloaded and unallocated allowances into the MSR was a “positive signal” but waiting until the end of 2018 before introducing the MSR risked “holding down the carbon price and prolonging uncertainty”. And, responding to European Union’s ambitious ‘Energy Union’ plans, the IIGCC said the EU has created a “compelling vision” for an economy driven by clean energy supported by a forward-looking climate policy.

The Carbon Tracker Initiative, the think tank, has launched a tool that will help investors challenge company boards over future investment decisions that are deemed high risk amid oil price volatility. Capex Tracker comes as Carbon Tracker said the oil industry has cut spending by $33bn for 2015 due to sliding oil prices. The most recent blow, it said, was Royal Dutch Shell’s announcement it is dropping plans to build a new mine in northern Alberta. It was the “latest in a slew of project cancellations” by oil companies forced to cut spending.

A coalition of investors concerned about the effects of fracking say they have filed shareholder proposals at Chevron, ExxonMobil, WPX Energy, QEP Resources, SM Energy and Chesapeake Energy Corporation urging greater transparency in how key risks are being managed, and urging the latter to recruit environmental experts for its board of directors. The investor coalition, which represents members of the Investor Environmental Health Network including Green Century Capital Management, As You Sow, Mercy Investment Services, Calvert Investments, and the Sisters of St. Francis of Philadelphia, argues that the industry’s lack of transparency makes it difficult to evaluate how companies manage key fracking risks.

Social

London theatre, Shakespeare’s Globe, is in the early stages of preparations for a £5m (€6.9m) social impact bond that will help finance a new library, archive and research centre at its site on the South Bank of the Thames in London. The Telegraph reports that the Globe’s directors hope to launch the social impact bond in late 2017. It will be its first foray into the social investment market.

Not-for-profit The Maturity Institute, its professional arm OMS LLP and Long Finance, an institute that promotes long-termism, have released the first Organisation Maturity Index for its first 12 corporations. The OMI: 150 identifies the extent to which firms are able to generate business value and mitigate risk with respect to their human capital.h6. Governance

Global bank Citigroup has said that it will back a proposal filed by shareholder activist James McRitchie on “proxy access”, which will make it easier for shareholders to nominate directors. In a statement, Citi said: “Citi has always worked to stay at the forefront of good governance and we value robust engagement with our shareholders.” This month, General Electric made similar moves. New York Comptroller Scott Stringer, who is leading a campaign to urge boards to support proxy access, tweeted that the actions of Citi and GE showed they recognize that “meaningful proxy access is rapidly becoming inevitable”. Link

The Climate Disclosure Standards Board (CDSB), the consortium of business and environmental organizations, has published a table cross-referencing the requirements in the CDSB Reporting Framework with commonly used reporting provisions such as CDP, SASB, GRI, Integrated Reporting and UN Global Compact, and with regulatory requirements such as those outlined in the new EU Non-Financial Reporting Directive, UK Companies Act, German Sustainability Code and France’s Grenelle II. “This allows stakeholders to understand where requirements are similar and how information collected for one reporting audience/purpose can be used to satisfy the requirements of the CDSB Framework and the mainstream reporting model,” it says.

Executive pay levels are being decided by an “overpaid elite who are desperately out-of-touch” with ordinary workers, according to the Trades Union Congress, the UK umbrella labour union body. The TUC’s report “A Culture of Excess” finds that FTSE 100 remuneration committee members were paid on average £441,383 (€606,699), which is 16 times more than the average worker’s earnings. Furthermore, the highest paid committee member was paid over £9m, a “staggering” 339 times more than average earnings.

Judging by the proxy materials, a large majority (62%) of institutional investors does not understand how US corporate executives are paid and near half of those investors cannot, because of the complexity of the materials, decide whether the pay is appropriate or linked to rigorous goals. These are some of the findings of a new survey of 64 institutional investors by researchers at Stanford University in California. The investors hold $17trn (€14.8bn) in assets. According to the study, the investors are not just in the dark about executive pay, but frustrated by the length and complexity of US proxy filings. For example, 80 pages is the typical length of a proxy for the 3000 firms included in the Russell equity index.

Comments are being sought on a Green Paper consultationRestarting European Long-Term Investment Finance – by the Centre for Economic Policy Research. It examines evidence and policy on corporate financing in Europe and sets out a research agenda for addressing the academic and policy issues. Comments please to Anna Mennella at the Centre for Economic Policy Research by February 27.